As ad tech surges, challenges remain — and not just from the coronavirus pandemic | International Association of Digital Marketing Professionals (IADMP)

By Seb Joseph

Ad tech is having a moment, again. Far from being upended by the coronavirus pandemic, the much-maligned section of the ad industry is in rude health thanks in large part to a surge in online advertising.

Look no further than some of the largest public companies in the space. The Trade Desk’s shares were up 200% for the year at the end of December, while Magnite’s doubled over a similar period. Few areas of the ad industry have made such strong gains during one of the most turbulent years for economies worldwide.

The pressure is now on the sector’s main stakeholders to prove to both the industry and investors alike that it’s uplift is more sustainable and conscientious than it ever has been in the past.

On the surface, there are multiple reasons for ad tech to be optimistic about its chances.

In short, more ads are being bought online and subsequently via ad tech as evidenced by The Trade Desk’s market capitalization, which doubled in value last year to $28.6 billion — making it bigger than Omnicom and WPP, the world’s largest advertising holding groups — combined. The coronavirus intensified existing bright spots like connected TV, commerce and audio for ad tech and even banks seem impressed and some like Southern California-based East West Bank went so far as to extend lines of credit to programmatic — part of the market that has had its fair share of cash flow worries.

“It’s a testament to the strength of the industry that you have a bank that’s prepared to invest in what is usually seen as the riskiest part of the market,” said Hanna Kassis, CEO of Oarex, a invoice factoring company that was able to renew its existing $50 million deal with hedge fund Arena and secure another $50 million in credit from East West Bank.

Now, many ad tech companies, even those whose businesses took a direct hit from the outbreak, are finding they have to adapt to a time when cash is suddenly much harder to raise for the uncertainty that lies ahead. Pubmatic raised $118 from its IPO at the end of 2020, while both Israel-based IronSource and small-scale ad tech vendor AcuityAds plan similar moves sometime later this year.

“More successful IPOs could beget more successful IPOs given that we’ve seen a lot of this activity recently,” said Eric Franchi, operating partner at venture capital fund Math Capital. “That could have an interesting effect on M&A as public companies have a strong currency to do those sorts of deals given they tend to have a lot of liquid stock.”

IPOs. M&A. Explosive growth. Ad tech’s purple patch harks back to the advent of the industry back in 2013. The market had a ‘Wild West’ vibe back then. People were building businesses as fast as they could with very few rules or constraints except for what was ‘possible’ or cost-efficient. Along the way, those practices were found to be unhealthy, and, in effect, checks and balances were …read more

Source:: Digiday